KSD supports transparent investments in non-marketable assets

Korea Securities Depository (KSD) Senior Manager Kim Yong-chang introduces the depository's platform supporting investments in non-marketable assets, at GLAD Yeouido in Seoul in this June 28 file photo. Courtesy of KSD

More than 200 companies were using the Korea Securities Depository (KSD) platform that supports investments in non-marketable assets, as of August, data compiled by the state-run securities depository showed Monday.

Specifically, 201 asset management firms, 16 trust companies and eight other companies were using the platform. They registered a combined 3,147 assets that are difficult to trade on major exchanges.

The KSD opened the platform June 28 to prevent the recurrence of “mis-selling” by private equity funds, which led domestic retail investors to suffer significant losses. Mis-selling refers to the deliberate misrepresentation of a financial product or misleading customers about the nature of the product.

“Due to the sluggish economic growth, low interest rates and a government policy to encourage venture funds, the private equity industry has shown quantitative growth, but fund managers have increased investments in lucrative non-marketable assets, causing side effects, such as negligence in customer protection,” a KSD official said.

The public institution cited an imbalance in information about investments in non-marketable assets as one of the main reasons behind the mis-selling of funds. In August last year, the KSD promised to build a system that enables mutual supervision among market participants to enhance transparency in the private equity industry and support the efforts of financial regulators to foster venture capital.

The KSD decided to set up a standard classification system and a digital platform for non-marketable assets. The depository said it also held multiple meetings with market participants, and spent six months to develop the system and conduct trial runs.

“It seems that the platform will improve efficiency and reduce risks,” the KSD official said. “We also expect the private equity industry to enhance its stability and transparency, restoring the trust of investors.”

The depository plans to continue to upgrade the platform by offering additional services.

In May next year, the KSD will open a system that enables investors to receive information on the management of non-marketable assets. (advertorial)